ISLAMABAD: The Federal Board of Revenue (FBR) Wednesday strongly defended the withdrawal of the condition to provide the Computerized National Identity Card (CNIC) numbers on supplies made to unregistered persons through the Finance Bill, 2022.
Briefing on the withdrawal of this major documentation measure, Chief Inland Revenue (Policy) informed the Senate Standing Committee on Finance on Wednesday that the FBR was taking two adverse actions against the suppliers to the un-registered persons.
First, the sellers were bound to deposit three percent additional sales tax.
Second, the input tax adjustment was denied where the CNICs of the un-registered buyers were not given. Thus, there were multiple consequences for the registered supplies or sellers under the sales tax law. Now, this condition has been withdrawn, but the additional sales tax would continue to be charged on the supplies made to the unregistered persons. It is a relief to the already registered persons who were unnecessarily burdened by the stringent legal provision.
She informed that the Finance Bill, 2022, has removed the condition of providing the CNIC or the NTN of the unregistered person through a proposed amendment brought under section 23 of the Sales Tax Act, 1990, read with section 8(1)m of the Act.
Restriction and disallowance of correspondence amount of input tax in case of not providing the CNIC or NTN are also lifted from the omission of clause m of section 8(1) of the Act.
Supplies to unregistered persons: CNIC condition waived
Chief Inland Revenue (Policy) further informed that there were also complaints that sellers of Karachi are presenting the CNICs of the un-registered buyers of Peshawar.
Later, the committee approved the proposal of withdrawal of the requirement of furnishing CNIC in case of supplies to the un-registered persons.
Tax authorities informed that the Cabinet has not approved an increase in the sales tax rate on CKD/SKD kits of mobile devices and an increase in the rate of sales tax on fertilizer inputs.
The committee approved the proposal to enhance the rate of the Federal Excise Duty (FED) on club, business and first-class travel by air from Rs10,000 to Rs50,000.
Committee members apprehended that the people would start purchasing tickets from foreign/transit destinations.
Minister of State for Petroleum, Senator Musadik Malik informed the committee that the government’s policy of new federal budget is to impose additional taxes on the rich class and those having the capacity to pay taxes. Taking this into account, the increase in the rate of the FED on first-class air travel is justified.
Malik stated that if any Pakistani wanted to avoid this FED and intended to buy a ticket from a foreign/transit destination, he has to purchase tickets in dollars and pounds and also pay taxes on credit card payments on international transactions.
Chairman of the committee Senator Saleem Mandviwalla was of the view that the taxation of international air travel should be done in such a way that the revenue of the FBR stays in Pakistan and it does not transfer to other countries.
When Mandviwalla asked the Finance Division to take up the matter of amendment in Finance Act 2016 for the imposition of the Levy on the import of mobile phones, the official of the Finance Division was not aware of the background of the levy and rates in 2021-22 and proposed rationale behind the new rates. The Finance Division will explain the rates on Thursday (today).
About the fixed tax scheme for retailers, Senator Mohsin Aziz stated that it is a political move of a political party to allow fixed tax to the retailers. The FBR should share the number of retailers to be brought under the fixed tax scheme.
Responding to this, the FBR Chairman, Asim Ahmad, said that the sales tax was already applicable on the electricity bills of shopkeepers and small retailers. However, the FBR has enhanced the rate of tax. This is not a new tax and the fixed scheme was always there in the law, he added.
The finance committee proposed a 12.5 percent sales tax on the import of electric vehicles (up to 1000cc or 50KV) in CBU condition and 17 percent sales tax on the import of electric vehicles (above 50KV).
Under the Finance Bill 2022, the FBR has proposed a uniform rate of 2.5 percent sales tax on the import of all types of electric vehicles in CBU condition.
Committee members were of the view that the low sales tax rate should be applicable on the import of small electric vehicles as compared to big cars. FBR Chairman responded that only big electric vehicles were imported in the past.
Senator Talha Mahmood objected that the business community should be provided tax relief to encourage more investment and creation of job opportunities.
The FBR Chief Sales Tax (Policy) informed that the issue of sales tax on restaurants has been resolved between the federation and provinces and now provinces would collect sales tax on restaurants.
The committee deferred the proposal of exemption of sales tax on restaurants till the FBR share the minutes of the meeting showing agreement between the federation and provinces on the issue.
Senator Farooq H Naek informed that the committee cannot give approval of the proposal until the FBR shows National Tax Council minutes in this regard.
Copyright Business Recorder, 2022
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